Document Content

CIRCULAR No

CIRCULAR No. 26/2002/TT-BTC OF MARCH 22, 2002 GUIDING THE FINANCIAL HANDLING WHEN STATE ENTERPRISES, ENTERPRISES OF POLITICAL ORGANIZATIONS OR SOCIO-POLITICAL ORGANIZATIONS ARE TRANSFORMED INTO ONE-MEMBER LIMITED LIABILITY COMPANIES

In furtherance of the Government�s Decree No.63/2001/ND-CP of September 14, 2001 on the transformation of State enterprises and enterprises of political organizations or socio-political organizations into one-member limited liability companies, the Ministry of Finance hereby guides the relevant financial matters in the process of transforming State enterprises and enterprises of political organizations or socio-political organizations into one-member limited liability companies, as follows:

I. SCOPE AND OBJECTS OF APPLICATION

State enterprises and enterprises of political organizations or socio-political organizations that conduct business activities (hereinafter referred collectively to as enterprises) and are transformed into one-member limited liability companies (hereinafter referred to as companies for short) under decisions of the State or such political or socio-political organizations.

II. FINANCIAL HANDLING WHEN ENTERPRISES ARE TRANSFORMED

INTO COMPANIES

1. When being notified by the competent authorities of the plans on their transformation into companies, enterprises shall have to inventory their assets, available capital sources and funds at the time of their transformation into companies, for inscription thereof in the transformation decisions, more concretely:

1.1. To inventory and determine the quantity of assets (fixed assets and long-term investments, liquid assets and short-term investments), to compare them with the figures recorded in the accounting books for determining redundant or deficient assets, clearly verifying causes and responsibilities of the concerned persons and proposing handling measures for such redundant or deficient assets. To evaluate the actual state of and classify assets which they need to use as well as those they need not to use, then propose measures to handle each type of assets.

1.2. To inventory and compare debts to be recovered or repaid, capital sources, funds, balance of bank accounts; to assess and categorize debts according to the current regulations:

- For to be-recovered debts, they must clearly determine recoverable debts, bad debts and irrecoverable debts. They must analyze causes thereof and responsibilities of individuals and collectives for each bad debt or irrecoverable debt, and propose handling measures therefor.

- For to be-repaid debts, they must clearly determine each to be-repaid debt amount. They must analyze causes and responsibilities of individuals and collectives for each debt amount without creditor to repay to or over-due debt, so as to propose the handling measures.

2. Basing themselves on results of inventory and categorization of assets and capital as well as figures in the latest financial statements, enterprises shall work out plans for handling the financial matters (incorporated in the transformation plans) and report them to the competent authorities for approval. After the transformation plans (including financial handling plans) are approved, the enterprises shall take initiative in handling the financial matters according to the following regulations:

2.1. For assets:

- For redundant assets, unused assets or assets awaiting liquidation, enterprises may assign, sell or liquidate them according to the current regulations applicable to State enterprises. The difference between the proceeds from the assignment, sale or liquidation of assets and the remaining value thereof and expenses for such liquidation, assignment or sale shall be accounted into the income of the enterprises.

- For assets, which are leased, borrowed, kept in custody or consigned by others: Enterprises shall, depending on their demands, reach agreement with the persons that have leased, lent or consigned such assets on further possession or liquidation of the leasing, borrowing,... contracts before the transformation.

- Disparities in inventoried assets: Enterprises must clearly verify causes of redundancy or deficit, and shall handle them as follows:

+ For redundant assets for which enterprises cannot verify causes and identify owners: Enterprises shall account increase of State capital corresponding to actual value of such redundant assets.

+ For deficient assets, lost assets and other asset losses: The disparity between the remaining asset value recorded in books and the compensations paid by concerned individuals and/or collectives or insurance agencies (if any) shall be offset by the financial reserve fund. Deficit after the offsetting shall be cleared against the State capital or capital of political or socio-political organizations at the enterprises.

2.2. For to be-recovered or to be-repaid debts:

- For to be-repaid debts: Companies shall have to inherit and repay debts to creditors as committed, including tax arrears, budget debts and debts owed to staff members and employees.

For to be-repaid debts without creditors, enterprises shall account them as the increase of owners� capital.

- For to be-recovered debts: Companies shall have to take up to be-recovered debts from transformed enterprises and collect recoverable due debts.

To be-recovered debts which are irrecoverable (including remaining debts of debtors who have completed their dissolution or bankruptcy, who have died without any heirs; or who are serving sentences or have fled away for more than 2 years and unable to repay debts; debts already written off under decisions of the competent authorities; loss difference due to debt sale) shall be offset by the enterprises with the bad debt reserve and financial reserve fund after subtracting compensations paid by the concerned individuals or collectives. If these funds are not enough to offset, the deficit shall be cleared against capital of the State or capital of political or socio-political organizations at enterprises before the transformation.

2.3. Remainders (if any) of the reserves for decrease of prices of goods in stock and investment securities, reserve for bad debts, financial reserve fund, reserve for job loss, after covering asset losses and/or irrecoverable debts, shall be carried forward by enterprises for further use by companies.

3. Within 30 days after the completion of the transformation, enterprises shall have to make financial statements at the time of transformation and submit them to the competent authorities for approval. Such financial statements shall serve as basis for the hand-over to companies. Financial statements shall be made according to the current regulations. Enterprises shall have to clearly explain the handling of lost assets, irrecoverable debts to be recorded as capital decrease; or redundant assets and non-repayable debts to be recorded as capital increase.

- Competence to approve financial statements of enterprises at the time of transformation:

+ The ministers and the heads of the ministerial-level agencies shall approve financial statements of State enterprises under their respective ministries and central branches.

+ The presidents of the People�s Committees of the provinces and centrally-run cities shall approve financial statements of enterprises established under decisions of the People�s Committees of the provinces and centrally-run cities.

+ Leaders of political or socio-political organizations shall approve financial statements of enterprises managed by such political or socio-political organizations.

+ Managing boards of the State Corporations shall approve financial statements of enterprises being members of such State Corporations established under the Prime Minister�s decisions.

4. The actual capital of company owners by the time of transformation, determined on the basis of financial statements approved at that time, shall be approved by the competent authorities and include balance of the following accounts: Account 411 - Business capital source, Account 441 - Capital source for capital construction investment, and Account 414 - Development investment fund.

Charter capital of a company shall be determined on the basis of its development demand and scale and its capital mobilization capability, including the actual capital at the time of transformation, the gradually supplemented capital in its business process and capital committed to be added by the owner (if any).

For political organizations and socio-political organizations not yet handed over by the State the ownership right over the State capital amount invested in their enterprises, it is necessary to clearly define the capital under the ownership of such political organizations and socio-political organizations and the State capital actually available at enterprises (if any). The State shall authorize the political organizations and socio-political organizations to represent the owners of the State capital at enterprises.

For business lines and trades which require legal capital under the provisions of law, the companies� charter capital must not be lower than their legal capital.

For cases of supplementation of capital to companies, the supplementary capital amounts and the committed supplement duration must be clearly inscribed. Owners of companies shall have to invest in full the charter capital of the companies within the committed time limit. In cases where owners fail to fully contribute the committed capital within the time limit, they shall bear responsibility therefor according to the provisions in Clause 1, Article 27 of the Law on Enterprises.

5. Enterprises shall hand over to companies all their assets and capital available at the time of transformation, together with relevant dossiers and documents. The hand-over and reception of assets, capital, funds, debts from enterprises to companies must be recorded in writing to serve as basis for management, monitoring, inspection and supervision.

Redundant assets, unused assets or assets awaiting liquidation, which have been determined in transformation plans but not yet handled by enterprises, shall be transferred to companies for handling.

All assets of enterprises, in the course of transformation, shall be calculated in value.

6. The ministries, the ministerial-level agencies, the agencies attached to the Government, the People�s Committees of the provinces and centrally-run cities, the managing boards of the State Corporations, political organizations and socio-political organizations may be authorized to act as owners� representatives. Owners of one-member limited liability companies shall have to manage the capital amounts of the State, or of political organizations or socio-political organizations according to the provisions of the current regime.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect 15 days after its signing. Any problems arising the course of implementation of this Circular should be promptly reported by the concerned ministries, branches, localities and enterprises to the Ministry of Finance for study and guidance for solution.

For the Minister of Finance

Vice Minister
TRAN VAN TA